We have recently heard of a number of agencies that are ‘operating’ property management departments and offering extremely low management fees. We’ve recently seen a sign in a window of one agency that was offering management for only 1%, but with no mention of what their ancillary charges may be.
I doubt this particular agency will still be in business in 12 months’ time!!
Discussion and comments on what fees should be charged do happen obviously and we are often asked to discount the fees we charge. It’s not a new thing to see some new agencies offering ridiculous discounts! But I’d like to explain why these discounts are ridiculous.
The real estate industry recommends that to be able to operate and function effectively, a property management department should generate between $1,000 and $1,500 income – per property, per year. Anything below this range indicates that an agency is just not making any profit at all. Any figure within this recommended range covers everything done as part of managing any property and in the grand scheme of things, it’s not a huge amount!! Obviously this is an average range but it is a guide for what property management departments should be looking to achieve. The average rental in Sydney would be a whole lot more than the average rental in a small country town, but this is the average. Large offices with high rents would certainly be looking to be well over $1500 per property per year and in country areas it may not be possible to achieve $1000 per property per year, but the average range of $1,000 to $1,500 is what most agencies across Australia would be earning.
I hope this explains that those agencies who do try to attract business by offering a ridiculous management percentage, will not remain in business. It’s just not possible to be profitable with discounted fees and every business has to be profitable!
If you have any questions on any aspect of property management, please don’t hesitate to call or send me an email… Jan Malmstrom 0408 769 053 or jan@investorsdirect.com.au
We look forward to hearing from you!